Green Ocean ,Blue Ocean ,Astronomer & Astrounaut

This saturday i attended a event organized by Tie-BoA . Agenda of this event was to announce a collaboration /Alliance bitween Tie and Band Of Angeles as an initiatvie to nurture a Silicon Valley like Eco System in india.

I am writng this post to highlight one aspect of any such event which i have seen in all of the gathering sometime under the surface sometiem openly .

Its the Silo or Communication gap bitween Investor and Enterprenuer .

Be it VC or Angel , Institutional or Individual there is always a conflict of interest bitween both of the parties . As a matter of fact this phenomena is not confined to this country . Even in developed economies tales of VC-enterprenuer conflict is commonplace.

This used to baffel me when i started attending such gathering around a year back . by every logic i can think of , VC and Enteprenuer should work togther and it should be a win-win deal . but after one year and 10-12 such gathering i can safely say that this is hardly the case .

what is suppose to be a "Meeting Of Minds " often Turns in to a "Clash of Heads" :) why ?

As an aspiring enterprenuer i have a significant interest in exploring answer to this Question.So that when i approach potential investor in my venture i can avoid all that .

Before i start let me tell you a very interesting but true story to set the context

After three moths of talks and many presntations when it was time to decide . A leading Ex-i banker Turned VC said to a budding indian enterpreneur "u seems to have a good idea and i don't really doubt your credentials , team is ok . but your IDEA can be easily copied by big guys ".

He answered "yes sir! it s very likely that they can . but unlikely that they will" .

VC said "what stops them to enter in your space. ?"

He said "Well only thing which stops me is lack of money to hire programmers and run my operation but big guys don't have that constraint so i guess nothing will prevent them if they want to ,but they will not ."

but VC was ex I Banker and Ex MBA with the habbit of throwing TLA (Three letter Accronym ie ROI,NAV,TVC,TQM,EBIDTA etc ) in every sentence and enterprenuer was a street smart guy who despise all the "Theory " about business.

so VC said " what i am worried about is how you will create a Blue Ocean ? "

By this time enterprenuer was totaly frustraed and decided that he will not work with this guy even if he give me a million $ . so he said in a mocking tone

" i will take a "Green Ocean " of Money from you and Turn it into Blue Ocean of Commpetieve Advantage and thus we will have an ROI which will show dissporoptinate value creation .We will disrupt the existing eco system of our Industry and we will alter the risk reward equilibrium for ever . [LONG PAUSE]

Sir I don't want to work with you now so I am telling you the truth , I don't want your GYAN . you can't run a kirana shop with all your TLAs. Truth is, idiot like me come to you for your money Because thats what you are good for.

don't trust me ?? ask your wife why she married you . "


Needless to say he didn't get the funding :) .


I don't think that the gentelman's response was justified by any yardstick .NO MATTER WHAT THE PROVOCATION WAS . But still i choose this example because i wanted to highlight the deep rooted despise an Enterprenuer have toward all this management lingo. if there is a story which show it in true color this is the one . The silo we are talking about is very very big .

Green Ocean :

Marriage is the only war where you sleep with the
enemy.                                     

- Gary Busey

I think this Gary fellow never raised money from a VC

-annonymus enterprenuer

About a year back, i attended a talk by legnedary VC Jhon Doerr of KPCB. He said that in every booming market where there is a possibility of making quick money ,there are two type of people . Mercenary and Missionary .

Mercenary wants to create quick wealth and Missionary wants to create a great product /company. Mercenary is driven by greed & Missionary is driven by sense of achivement . and trouble is that Often It is not easy to differentiate bitween the two .

In the context of our story the mercenary is the one who is only interested in "Green Ocean" of money .
I have seen some enterprenuer who are so much obssesed with funding that for them success of venture equate to securing funding only. On the other hand we have heard that in some of the greatest success stories of our times Promoter end up having only a minority shares at time of exit .

Collective equity founders of yahoo or Excite or even SGI were less than 25% at the time of IPO/acquisiton . sadly in india we don't even have these numbers available with us . i really don't know what to dedeuce from this observation . i am in a fix .

In the light of these fact when VC and Enterprenuer approach each other they always seems to believe that the guy on the other side of the table is interested in "Green Ocean" only. This leads to a feeling of mutual distrust. I seriously believe that its a job of enterprenuer to take initiatvie to comfort the VC and Clear the mist .

Blue Ocean :

"Big companies are good at extracting the value from existing products, but bad at creating new ones. Why? To start with, most big companies have some kind of turf to protect, and this tends to warp their development decisions.

For example, Web-based applications are hot now, but within Microsoft there must be a lot of ambivalence about them,because the very idea of Web-based software threatens the desktop. So any Web-based application that Microsoft ends up with, will probably, like Hotmail, be something developed outside the company."
Paul Graham

BLUE OCEAN .This is the latest buzz word in venture circle :) . Very often investors ask this Question .

What stops Yahoo or Microsoft or Google or IBM (Darn !!!) from entering in your line of business ?

and the only correct answer i can think of is Nothing .

Nothing can stops Microsoft from opening a Hamburger joint in Subway and compete with Macdoanld . but the Question is will they do it ?

May be ,May be not ? Will they be doing it before a small nimble footed startup ? certainly not .

It takes a month to put a server in server farm at Redmond ,so much for flexibilty and agile business.

Funny thing is investor talk of having Blue Ocean of Competetive advantage . in my view unless you are in to very very hard core technology ,startup can have only one advantage .
Advantage of size and low cost operation.(not sure if its a "Blue Ocean" or not ) startups are basically experiment . and experiement can go wrong .

Yahoo should defintley come in my line of business .that is the last think we should worrry about . i will be a fool if they don't .

Million dollar Q is if they came ..will they Buy me or Copy me or Buy my competietor ? well i think this depend on three factor

1) When they discover me ? Pre Launch or Post Launch

2) How good a job i have done ? (userbase ,scalability,Brand etc)

3) Do i have the right connections to close the deal ?

I think if VC really wants a "Blue Ocean" they should create one by Taking care of #1 & #3 so that enterprenuer can focus on #2 . That is the only "Blue Ocean" a startup can afford . :)

So i strongly believe that the concern about "Blue Ocean" and fear of being copied by Big guys are baseless. isn't that the opportunity for which all of us are here ? isn't it the fun ? :)


Astrounaut & Astronomer :

What is the diffrence bitween an Astromomer and Astronaut ?

Astronomer study the space from a distance , chart a path for ship , do the calculations, warn about any possible metroide which may hit and then clears the way for astrounaut . Once in outer space astraunaut is on his own . He steer the ship on his own judgement with ocaasional input from ground station .sometime all the collective wisdom of astronomers won't help him and he will have to act on his gut instinct if he wantto come back safely .

Yet every kid want to be a astronaut and hardly any one know about astronomer till he start preparing for his voyage .

launching a venture is like a space voyage where VC is like astronomer ( because of his experience) and enterprenuer is astronaut . This is the best analogy i can come up with to expalin my understnading of an ideal relation ship bitween VC & Enterprenuer . Both are equally important for a succesfull space voyage .

There should be an exchange of ideas and clarity of communication bitween them . Tendency to one up each other won't help any of them .

I admit enterprenuer enjoy moe lime light but if you remove the exception of Microsoft i am yet to see a success story where VC was not significantly involed in shaping the destiny of venture (and his own by side effect:) )

This is my Two cents on this issue , i would like to have your feedback on this .Please help me to get it right :)

P.S .I know it is a very long post so if you are still reading . Thanks for your patience .I hope it was worth your time :)